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Monday, January 13, 2014

World’s first insured Bitcoin vault opens in UK

Definition of
'Bitcoin':A
digital or virtual currency that uses peer-to-peer technology to facilitate
instant payments. Bitcoin is a type of alternative currency known as a
cryptocurrency, which uses cryptography for security, making it difficult to
counterfeit. Bitcoin issuance and transactions are carried out collectively by
the network, with no central authority. The total number of Bitcoins that will
be issued is capped at 21 million to ensure they are not devalued by limitless
supply. They are divisible to 8 decimal places; Bitcoin fractions are called
satoshis. Users store their Bitcoins in a digital wallet, while transactions
are verified by a digital signature known as a public-encryption key.

The world’s first Bitcoin storage service
that insures deposits of the digital currency against hackers and accidental
loss has opened in London.

Bitcoin is a virtual currency that can be
generated through complex computer software systems with solutions shared on a
network.

Although, the digital currency is gaining
popularity, concerns about its security are on the rise. Online wallets used to
store Bitcoins have been subject to a number of cyber-attacks and some users
have also suffered from accidental loss.

The new Bitcoin storage service offering
insurance in U.K., named Elliptic Vault, uses “deep cold storage” techniques to
secure the digital currency.

Bitcoin keys are encrypted and stored
offline. There are multiple copies, protected by layers of cryptographic and
physical security.

The copies are accessible only via a quorum
of Elliptic’s directors.

The facility’s founders claim they are the
“first in the world” to offer insurance for Bitcoin owners.

Unlike money stored in a conventional bank,
Bitcoins are not insured and there is no way of retrieving them.

“One of the main concerns people have with
Bitcoin is that it’s quite difficult to store securely,” Elliptic co-founder
Tom Robinson told the BBC.

“Offering people insurance seemed an obvious
step,” said Mr. Robinson, an Oxford graduate, who started the company with two
friends.

Lloyds of London is the underwriter for the
Elliptic Vault service and insurance payouts will be calculated using the
Bitcoin to U.S. dollar exchange rate at the time a claim is made.

Elliptic’s launch comes as governments around
the world are deciding how to legislate for the digital currency.

Asian financial hub Singapore has become one
of the first countries to issue guidance on taxation for Bitcoin businesses,
although it also said it was monitoring transactions to detect illicit
financing by criminals and terrorists.

In India, a number of Bitcoin operators have
suspended their business following the recent warning by the country’s central
bank against use of such virtual currencies due to potential money laundering
and cyber security risks.

However, the Reserve Bank of India (RBI) is
yet to come out with a clear regulatory framework for Bitcoins.

In the US, Overstock.com has become one of
the first major online retailers to accept Bitcoin.

Bitcoin came into existence in 2009. It has
become the world’s most expensive currency and its per unit value soared past
$1,200 level or about Rs. 63,000 in November 2013.